What to do when the market trades near an important level

AUDUSD

Hey traders, hope everything is going well on your end…

Let me ask you one question…

What do you do when the market trades near an important long term level?

The answer to this question will come in handy today, because today, there are plenty of currency pairs that are trading near an important level…

And you need to be prepared… so again… What do you do? Whats the first thing that pops up in your mind?

Think about it and comment below…

Here is what I think…

When ever the market trades near an important long term level, the market can do three things:

  • Get rejected from that level
  • Break through that level
  • Trade in a tight range around that level

Now, there are a lot of traders that try “guess” what is going to happen, sometimes they will nail it down, but most of the times they will fail…

My approach to handle this

Most of the time, when the market trades near an important level, it will range in the short term charts…

So, when ever the market gets near an important level, I patiently wait for that range in the short term charts. Sometimes this range develops in a few hours, but some other in a few weeks… So if you arent a patient trader, learn to be one.

Once you have a clear short term range, you can have a trading plan.

If the market breaks through the upper extreme of the range, you’ll begin to look for long opportunities.

If the market breaks through the lower extreme of the range, you’ll begin to look for short opportunities.

That simple!

Lets take a look at some examples…

AUDUSD Analysis

It is trading near an important long term level around 0.8750

AUDUSD 1D

It looks like it has been already rejected from that level… but that’s not the case, a few days back it did exactly the same thing but it retraced back…

So in order to determine what the market is likely to do we need to look at the short term charts:

AUDUSD 1H

In this chart you can see that the AUDUSD is still trading inside that range, but you can have a complete trading plan now…

If it breaks above the resistance level, you’ll start looking for long opportunities. Or if it breaks through the bottom of the range you’ll start to look for short opportunities.

Makes sense?

If you take a look at other charts you’ll see they are behaving in a similar way… the NZDUSD for instance and others.

Your Turn

What do you do when the market trades near an important level?

Are you currently trading the AUDUSD?

What other pairs are you trading?

How did you do last week with the NFP report?

Share your thoughts!

AUDUSD, forex, important level, range, resistance, support


Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .